National Competition Policy Review Of

NATIONAL COMPETITION POLICY REVIEW OF COMMONWEALTH FISHERIES LEGISLATION

September 2002

FOREWORD

In April 1995, the Council of Australian Governments signed three agreements establishing a National Competition Policy for Australia. Those agreements define a comprehensive package of reforms that require the review and, where appropriate, the reform of all laws that restrict competition. Each jurisdiction (Commonwealth, State and Territory) is responsible for the review of its own legislation. This report is a review of Commonwealth fisheries legislation as required by National Competition Policy and focuses on the Fisheries Management Act 1991, the Fisheries Administration Act 1991 and subsidiary legislation.

It needs to be stressed at the outset that this report is a review of the legislation as required by National Competition Policy. It is not a review of the general management of fisheries or a review of fisheries policy framework.

This report can be read in conjunction with

Principles underlying fisheries legislation throughout Australia – National Competition Policy Scoping paper (April 1998) prepared by the Centre for International Economics
Guidelines for NCP legislation reviews (Feb. 1999) prepared by the Centre for International Economics.

Mr Howard Allen of the Fisheries and Aquaculture Branch of the Department of Agriculture, Fisheries and Forestry acted as Secretary to the Committee. The Committee appreciates Mr Allen’s contribution to the review and expresses its thanks. Mr Allen was promoted outside the Department and from 2 May 2000 Ms Joanna Fisher was seconded to assist in finalising the review. Her contribution is also very much appreciated by the Committee. In November 2000, Messrs Jonathon Barrington and Neil Garbutt of the Fisheries and Aquaculture Branch succeeded Ms Fisher in her work. Messrs Barrington and Garbutt contributed to the final drafting of the document and their work in editing parts of the review is highly appreciated by the Committee.

Assistance was also sought from Mr Frank Meany (fisheries consultant) and the Committee values his input.

Fred Woodhouse
Chair
Committee of Officials

FOREWORD

TABLE OF CONTENTS

EXECUTIVE SUMMARY

Background

Fisheries management objectives

The review process

Findings and recommendations

NATIONAL COMPETITION POLICY REVIEW OF COMMONWEALTH FISHERIES LEGISLATION

1.OVERVIEW

1.1The review process

1.2The Issues Paper

1.3Scope of the review

1.4Committee meetings

2.RATIONALE FOR COMMONWEALTH GOVERNMENT INVOLVEMENT IN FISHERIES MANAGEMENT

2.1The economics of fisheries

2.2The biology of fisheries

2.3History of development of Australian fisheries

2.4Legislative framework

2.5Fisheries management

3.FISHERIES LEGISLATION UNDER REVIEW

3.1Description of legislation under review

Fisheries Management Act 1991

Fisheries Administration Act 1991

Fisheries Legislation (Consequential Provisions) Act 1991

Statutory Fishing Rights Charge Act 1991

Fisheries Agreements (Payments) Act 1991

Fishing Levy Act 1991

Foreign Fishing Licences Levy Act 1991

Northern Prawn Fishery Voluntary Adjustment Scheme Loan Guarantee Act 1985

Fisheries Levy Act 1984

3.2Other NCP reviews of fisheries legislation

4.CLARIFICATION OF OBJECTIVES OF FISHERIES LEGISLATION

4.1Identification of objectives

Fisheries Management Act 1991

Fisheries Administration Act 1991

4.2Assessment of the objectives according to priority, consistency and contemporary relevance

4.3Judicial consideration

5.CURRENT OPERATION OF THE LEGISLATION AND IDENTIFICATION OF POTENTIAL RESTRICTIONS ON COMPETITION

5.1Output controls in fisheries management

RESTRICTION A: Competitive total allowable catches (TACs)

Recommendation for Restriction A – competitive total allowable catches (TACs)

RESTRICTION B: Individual transferable quotas (ITQs)

Recommendation for Restriction B – individual transferable quotas (ITQs)

5.2Input controls in fisheries management

Effort creep in input controlled fisheries

Desirable characteristics of an input control management system

Committee’s conclusions on input controls

Measures used in input controlled fisheries

RESTRICTION C: Limited entry

Recommendation for Restriction C – limited entry

RESTRICTION D. Boat replacement restrictions

Recommendation for Restriction D – boat replacement restrictions

RESTRICTION E. Non–transferable fishing rights

Recommendations for Restriction E - non-transferable fishing rights

RESTRICTION F: Licence splitting

Recommendation for Restriction F – licence splitting

RESTRICTION G: Use of area closures in fisheries

Recommendation for Restriction G – area closures in fisheries

RESTRICTION H: Gear restrictions

Recommendation for Restriction H – gear restrictions

6.RECREATIONAL FISHING

6.1Management of recreational fisheries

6.2Recreational fishing in Australia

7.OTHER ISSUES RELEVANT TO COMPETITION IN THE FISHING INDUSTRY

7.1Auction, tender or ballot for allocation of fishing rights

RESTRICTION I: Auction, tender or ballot for allocation of fishing rights

Recommendation for Restriction I – auction, tender or ballot for allocation of fishing rights

7.2Paper work and cost recovery

7.3Cross sectional allocation issues

7.4Foreign fishing

7.5The United Nations Convention on the Law of the Sea

7.6United Nations Fish Stocks Agreement

7.7Fish stocks and data collection

7.8Exploratory fishing

7.9Offshore Constitutional Settlement (OCS)

7.10Suspension or cancellation of fishing concessions

8.SUMMARY

APPENDIX 1

Output Control Case Studies

Southern Bluefin Tuna (SBT) Fishery

South East Fishery (SEF)

APPENDIX 2

Input Control Case Study

Northern Prawn Fishery (NPF)

APPENDIX 3

Terms of Reference for review of the Fisheries Administration Act 1991 and Fisheries Management Act 1991

APPENDIX 4

Issues Paper

APPENDIX 5

Notice of the Review

APPENDIX 6

List of Submissions Received

APPENDIX 7

Glossary of Terms

APPENDIX 8

List of Acronyms

EXECUTIVE SUMMARY

Background

In April 1995, the Council of Australian Governments (COAG), which includes representation from the Commonwealth, State and Territory Governments, agreed to establish a National Competition Policy for Australia. The comprehensive package of reforms that COAG agreed to implement is based on the proposition that competition, if properly harnessed, can provide substantial benefits for consumers and boost economic performance.

Each jurisdiction (Commonwealth, State and Territory) is responsible for reviewing its own legislation with the aim of reforming all laws that restrict competition.

National Competition Policy (NCP) contains an explicit public interest test to allow restriction on competition to be retained where such restrictions serve the broad community interest. In general terms, legislation should not restrict competition unless it can be demonstrated that the benefits of the restriction to the community as a whole outweigh the costs and the objectives of the legislation can only be achieved by restricting competition.

The Government has an obligation to take into account the aspirations of a whole range of people in respect of this review, including commercial, recreational and traditional fishers in an effort to benefit the broader Australian community.

Under NCP, the Commonwealth Government has agreed that it will

identify the nature of the restrictions of an Act on competition
clarify the objectives of the legislation
analyse the likely effect of any identified restriction on competition on the economy generally
assess and balance the costs and benefits of the restriction
consider alternative means for achieving the same result, including non-legislative approaches
ensure that any proposals for new legislation which restrict competition are accompanied by evidence that it is consistent with the net public benefit principle.

There is no rigid definition of what constitutes a restriction on competition. The National Competition Council (NCC), established by the Commonwealth Government to advise on the progress of the Commonwealth, States and Territories in fulfilling their NCP requirements, has set down some criteria that identify what a restriction on competition might be. According to the NCC, an Act (together with its subsidiary regulations, orders, etc) could restrict competition if it

governs the entry and exit of firms or individuals into or out of markets
controls prices or production levels
restricts the quality, level or location of goods and services available
restricts advertising and promotional activities
restricts price or type of input used in the production process
is likely to confer significant costs on business
provides advantages to some firms over others by, for example, sheltering some activities from pressures of competition.

Although restrictions on competition impose costs on the community, under particular circumstances such restrictions may provide a net benefit to the community as a whole. Where a particular restriction on competition generates benefits for the community, this NCP review addresses whether these benefits can still be retained without that restriction. Conversely, while a restriction may not impose any costs on the community, this does not mean that the restriction should be retained. A restriction on competition can only be retained where a net benefit to the community can be identified.

The Committee is of the view that, because fisheries are a community-owned national resource, Governments must ensure biological over-exploitation does not occur, resources are not wasted in their harvest, ecosystem processes are safeguarded and the level of exploitation is consistent with the likely demands of present and future generations. The Committee is of the view that Governments are responsible for managing the marine environment and its harvestable resources so that benefits flow to the community as a whole, both today and in the longer term.

With the NCP review of fisheries policy, the prime question to be asked is not whether a particular measure would enhance or restrict competition but whether it would improve or impede economic efficiency. Unrestricted fishing effort will inevitably lead to the dissipation of any potential resource rents, the destruction of fish stocks and long-term environmental degradation. The issue is therefore not whether regulation of fisheries is necessary but whether a particular set of regulations is, in the circumstances, best suited to ensuring the sustainable development of fish stocks with minimum resource rent dissipation.

There are situations where competition does not achieve efficiency. It appears that much of the Commonwealth fisheries legislation is directed towards restricting competition in the harvesting of the nation’s fish resources. However, the Committee is conscious of the distinction between provisions directed at minimising the impact of failure on competition and any other measures that may restrict competition.

Fisheries management objectives

The Fisheries Management Act 1991 and the Fisheries Administration Act 1991 evolved from the 1989 Government policy statement New Directions for Commonwealth Fisheries Management in the 1990s. That policy statement indicated that the objectives for fisheries management should ensure fisheries resources are not over-exploited, commercial fishing operations enhance economic efficiency in fisheries, fishers are able to make a payment to the community for the right to exploit a public resource for private gain without reducing the profitability of fishing operations and Commonwealth fisheries are managed on the most efficient and effective basis.

The review process

A Committee of Officials was formed to review the Fisheries Management Act 1991, the Fisheries Administration Act 1991 and the subordinate legislation that contributes to the overall administration and management of Australia’s Commonwealth fisheries. The Committee prepared an Issues Paper[1] and sent a copy to every Commonwealth fishing concession holder.

Notices were placed in the press advising of the review and seeking submissions[2]. Twelve submissions were received[3].

The Committee identified restrictions on competition within the legislation, assessed the net community benefit of these restrictions and, where appropriate, considered alternative means for achieving the same result. The Committee made recommendations on the identified restrictions.

Findings and recommendations

The Committee was not required to consider whether removing restrictions would result in benefits. Rather, the Committee was mindful that if legislative restrictions on competition were to remain, it must be demonstrated that, as a result of retaining those restrictions, benefits flow to the Australian community as a whole.

The Committee found that there is a net public benefit arising from the existing restrictions on competition within the Commonwealth fisheries legislation. The Committee also found that there is a net public benefit in retaining restrictions in Commonwealth fisheries and the objectives of the legislation can only be achieved by restricting competition.

The recommendations of the Committee are listed hereunder -

Restriction A – competitive total allowable catches (TACs): The Committee recommends that where there is a clear identified need to implement timely catch restrictions in a fishery to avoid a stock decline, consideration should continue to be given to the application of a competitive TAC as a temporary measure whilst longer-term management arrangements are being developed and implemented. Consistent with existing policy, the Committee considers that the use of a competitive TAC is not preferred as a long-term management approach.

Restriction B – individual transferable quotas (ITQs):The Committee recommends that for any stock where it is possible to set and enforce practical TAC approaches, then the ongoing use of ITQs is the preferred fisheries management tool. Consistent with existing policy, the Committee considers that the use of ITQs is the preferred long-term management approach under the legislation.

Restriction C - limited entry: The Committee recommends that the current provisions in the legislation allowing restrictions to entry remain.

Restriction D – boat replacement restrictions: The Committee recommends that the current provisions within the legislation allowing restrictions on boat replacement remain.

Restriction E – non-transferable fishing rights: The Committee recommends that, when imposed as a temporary measure, non-transferable fishing rights have a net benefit to the community and should be retained. The Committee also recommends that, when imposing such a restriction, a sunset clause be required.

Restriction F – licence splitting: The Committee recommends that the current provisions within the legislation allowing restrictions on licence splitting remain.

Restriction G – area closures in fisheries: The Committee recommends that the provisions within the legislation allowing area closures remain.

Restriction H – gear restrictions: The Committee recommends that the provisions within the legislation allowing gear restrictions remain.

Restriction I – auction, tender or ballot for allocation of fishing rights:The Committee recommends that the provisions within the legislation allowing for auction, tender or ballot remain.

NATIONAL COMPETITION POLICY REVIEW OF COMMONWEALTH FISHERIES LEGISLATION

1.OVERVIEW

The gross value of commercial fish production in Australia in 1998-99 exceeded $2 billion, of which 75 per cent was received from exports. By way of comparison, it has been estimated that national expenditure on recreational fishing in 1998 was $2.926 billion[4]. It should be noted that the value for commercial fishing is based on landed commercial catch, whereas the estimated value for the recreational sector covers all expenditure including, for example, amounts spent on items such as boats, cars, accommodation and fishing gear.

In April 1995, all Australian Governments signed three agreements establishing a National Competition Policy (NCP) for Australia. The agreements define a comprehensive package of reforms that Governments undertook to put in place under the NCP process. These agreements are

the Competition Principles Agreement, which requires the review of all legislation with a view to clarifying objectives, identifying restrictions on competition, assessing their benefits and costs to the community and considering alternative, less restrictive ways of achieving community benefits

the Conduct Code Agreement, which sets out, amongst other things, the exceptions from competition laws, the funding and procedures for appointments to the Australian Competition and Consumer Commission and for modification to the competition laws
the Agreement to Implement the National Competition Policy and Related Reforms, which is an agreement under which the Commonwealth Government makes payments to the States and Territories provided satisfactory progress is made in implementing change identified as part of the review process.

The presumption underlying NCP is that restrictions will be removed unless they are proven to be beneficial. In general terms, legislation should not restrict competition unless it can be demonstrated that

the benefits of the restriction to the community as a whole outweigh the costs; and
the objectives of the legislation can only be achieved by restricting competition.

Although restrictions on competition impose costs on the community, under particular circumstances such restrictions may provide a net benefit to the community as a whole.

Where a particular restriction on competition generates benefits for the community, the NCP Review addresses whether these benefits can still be retained without that restriction. Conversely, while a restriction may not impose any costs on the community, this does not mean that the restriction should be retained. A restriction on competition can only be retained where a net benefit to the community can be identified.

governs the entry and exit of firms or individuals into or out of markets
controls prices or production levels
restricts the quality, level or location of goods and services available
restricts advertising and promotional activities
restricts price or type of input used in the production process
is likely to confer significant costs on business
provides advantages to some firms over others by, for example, sheltering some activities from pressures of competition.

It should be noted that each jurisdiction (Commonwealth, State and Territory) is responsible for reviewing its own legislation.

1.1The review process

The Commonwealth Department of Agriculture, Fisheries and Forestry established a Committee of Officials to conduct the review of Commonwealth fisheries legislation. The Committee consisted of an independent Chair appointed by the Minister for Agriculture, Fisheries and Forestry and a representative from each of the following

Australian Fisheries Management Authority
Australian Seafood Industry Council
Commonwealth Department of the Environment and Heritage
Commonwealth Department of Agriculture, Fisheries and Forestry
Commonwealth Scientific and Industrial Research Organisation
Recfish Australia
the commercial fishing industry.

Under the Competition Principles Agreement, the Committee was required to